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 Mon Jul 30, 2018
Bottom-Fish Comment: SSR delivers an anomaly surprise at Eskay Mining Corp's SIB project
    Publisher: Kaiser Research Online
    Author: Copyright 2018 John A. Kaiser

Eskay Mining Corp (ESK-V: $0.25)

Bottom-Fish Comment - July 30, 2018: SSR delivers an anomaly surprise at Eskay Mining Corp's SIB project

Eskay Mining Corp announced on July 11, 2018 that 60% farm-in partner SSR Mining Inc had started a 7,000-9,000 m drill program at the SIB project in the Golden Triangle which will focus on the northern part of the SIB project where the drills will be stepping farther west to chase the west dipping Salmon River Formation under the Coulter Creek Thrust Fault. The theory is that the stratigraphy flattens under the Bowser Lake sediments to the west. SSR will also drill to the south of the Lulu Zone which is now interpreted as a distal puddle rather than a tip decapitated from an Eskay Creek II iceberg by the CCTF. The southernmost hole (#EK17-141) yielded insignificant results though the rhyolite unit at the base of the Salmon River Formation thickens here. The Salmon River Formation consists of an earlier rhyolite volcanic unit through which a feeder system develops, possibly driven by felsite intrusions, a mudstone unit which is created by the smoker systems exhaling hot fluids whose metal payload precipitates onto the seafloor near the feeder vent (Eskay Creek I), and a younger post-mineral basalt that caps the VMS mineralization hosting mudstone unit. Carl Edmunds and David Gale of SSR are searching for thickening of the rhyolite portion of the Salmon River Formation because this would have allowed a long-lived feeder system to build up a VMS deposit within the mudstone. Last year's drill strategy of collaring holes to the west of the north-south trending, westward dipping SMF was an attempt to map the thickness of the stratigraphy and measure the geochemistry so that it would be possible to vector in on a feeder within the rhyolite and the resulting VMS exhalative pile within the mudstone unit above the rhyolite. Earlier this year SSR completed a high resolution airborne EM survey (HeliSam) over the SIB option claims. A HeliSAM survey is collected by a helicopter towing a bird and can "see" VMS deposits as deep as 1,000 m.

On July 27, 2018 Eskay Mining released a key finding of the survey which is a potential game-changer for the project. In the resource sector the importance of a news release is often inversely related to its verbosity and this latest one from Eskay Mining Corp qualifies as such. The first paragraph states that a "significant conductor in the relatively unexplored southern part of the property" has been outlined. The second paragraph has CEO Mac Balkam waving pom-poms about the exploration season now underway. And the third part is a graphic depicting the location and relative conductivity of the anomaly (see above, the Lulu zone is slightly to the NE of hole EK17-142). The center of the roughly 1,200 m by 600 m anomaly is about 2.5 km south of hole #EK17-141.

A fainter version of this anomaly did show up in 2005 when the previous operator Heritage-American had the project, but was never followed up on, possibly because this area is heavily wooded with little accessible outcrop. Furthermore, it appears that in this area the cover rock consists of younger Bowser Lake sediments which do not host orebodies in the Golden Triangle but whose pyritic and graphitic nature can generate spurious conductors. I have superimposed the anomaly on the satellite image above which also includes the results of historic stream sediment sampling. The gold values outline a strong anomaly over the Eskay Creek I deposit, an anomaly in the area where Lulu outcrops, and another anomaly in the SW corner of the SIB option which is unexplained. In the area of the new conductor gold values are less than 20 ppb. In the segment 5 km south of the conductor within the 80:20 JV with Kirkland Lake Gold Ltd before the 100% owned Corey claim starts it is a "data desert" because samples were never collected. If Eskay Creek II wanted to remain undiscovered, this would be the place to hide itself.

The anomaly poses a problem for Edmunds and Gale because there is a good chance that drilling in 2018 will not yield an Eskay Creek II discovery in the northern part of the SIB option, and there is always a risk that the bean-counters upstairs will deny their request for $4 million in 2019 to complete the job and vest SSR for 60% of the SIB project. The Eskay Creek I deposit did not exhibit a strong conductor because much of the mineralization consisted of sulfosalts, a complex sulphide mineral that is not very conductive. The anomaly that led Calpine/Stikine to step out 1 km to the north of the 21A gold zone in 1989 to drill the #109 discovery hole into the 21B Zone was apparently a chargeability high related to the stringer mineralization within the rhyolite below the mudstone hosted massive sulphides which today is the focus of Skeena Resources Ltd as the 21C Zone. Geophysics has thus not been regarded as overly helpful in the quest for Eskay Creek II. The property wide HeliSAM survey was conducted by SSR to help map the stratigraphy and maybe see more conventional massive sulphide mineralization down to 1,000 m depth. The anomaly is thus a big surprise which could be nothing, or it could be evidence of Eskay Creek II. It is located far enough from this year's planned drilling focus that SSR will have to scramble to get a rig past the devil's club and trees into position on top of the anomaly. This has enabled Mac Balkam to stop insisting to me that SSR will not quit until it has vested for 60% because Eskay Mining could easily fund drilling this target in 2019 if the ownership reverted to 80% Eskay Mining and 20% Kirkland Lake instead of net 20% to Eskay Mining. It is very likely that SSR will drill a hole into the SIB conductor this fall, provided it does not encounter permitting delays or logistical problems beyond its control.

Eskay Mining bottom-fishers would prefer to see SSR make or break the SIB conductor this fall, because not only would it set the junior's stock price on fire if it represents an Eskay Creek style VMS discovery, but because success would have very positive implications for the 80:20 Kirkland Lake JV land and the 100% Corey claims to the south. That unexplored 80:20 segment possibly covered by a thin veneer of Bowser Lake cover rock could be hiding fertile Salmon River Formation. The TV and Jeff showings to the east have already yielded Eskay Creek style mineralization that did not deliver size but would have to be revisited. In my Bottom-Fish Comment - May 15, 2018 I argued that an Eskay Creek II discovery by SSR in 2018 might be a longshot, but that activity next door at the Nickel Mountain project of Garibaldi Resources Corp will either validate the nickel potential of the Golden Triangle, or deliver a 90% stock price decline for Garibaldi. Owning Eskay Mining Corp would thus be a way to participate in the upside of Nickel Mountain without suffering the downside of a nickel bust. Eskay Mining has completed a VTEM survey in the western part of the 80:20 JV lands and is awaiting its interpretation. If targets emerge and Brent Cook's $0.35 price target for Garibaldi by PDAC 2019 proves wrong, Eric Sprott, who is the largest shareholder of Kirkland Lake, will stop waiting for this orphaned junior to keel over into his lap. I love the story of the Quest for Eskay Creek II and have had to counsel patience, but the arrival of this new anomaly in an unexplored part of the SIB option and the need for a hole #109 style stepout makes Eskay Mining Corp a considerably more urgent bottom-fish accumulation target.


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